G.R. No. 198677 , November 26, 2014
COMMISSIONER OF INTERNAL REVENUE, Petitioner, vs. BASF COATING + INKS PHILS., INC., Respondent.

FACTS

Respondent BASF Coating + Inks Phils., Inc., a corporation, resolved to dissolve by shortening its corporate term to March 31, 2001. It moved from its BIR-registered address in Las Piñas City to Calamba, Laguna. On June 26, 2001, respondent submitted two letters to the BIR Revenue District Officer: a notice of dissolution dated April 26, 2001, and a manifestation dated June 22, 2001, which included BIR Form No. 1905 updating its tax registration information. On January 17, 2003, petitioner Commissioner of Internal Revenue issued a Formal Assessment Notice (FAN) assessing deficiency taxes for 1999 in the aggregate amount of ₱18,671,343.14. The FAN was sent by registered mail on January 24, 2003, to respondent’s former Las Piñas address. On March 5, 2004, a First Notice Before Issuance of Warrant of Distraint and Levy was sent to the residence of one of respondent’s directors. Respondent filed protest letters on March 19, 2004, and April 16, 2004, citing lack of due process and prescription. After 180 days without action from petitioner, respondent filed a Petition for Review with the Court of Tax Appeals (CTA) on January 10, 2005. The CTA Special First Division granted the petition and cancelled the assessments. The CTA En Banc affirmed, ruling that petitioner’s right to assess had prescribed and the FAN never attained finality due to lack of receipt. Petitioner appealed, contending the prescriptive period was suspended under Section 223 of the Tax Code because respondent failed to notify the BIR in writing of its change of address.

ISSUE

1. Whether petitioner’s right to assess respondent for deficiency taxes for taxable year 1999 is barred by prescription.
2. Whether the Formal Assessment Notice for respondent’s deficiency taxes for 1999 has become final, executory, and demandable.

RULING

The Supreme Court denied the petition, affirming the CTA En Banc.
1. On prescription: The Court held that the three-year prescriptive period to assess under Sections 203 and 222 of the National Internal Revenue Code was not suspended. While Section 223 suspends the running of the statute of limitations when the taxpayer cannot be located at the address given in the return, and Section 11 of BIR Revenue Regulation No. 12-85 requires written notice of change of address, these provisions apply only if the BIR Commissioner is not aware of the taxpayer’s whereabouts. In this case, petitioner was actually aware of respondent’s new address in Calamba, Laguna, as evidenced by multiple documents in respondent’s BIR records, including BIR Form No. 1905 and other forms indicating the new address, which were submitted by respondent. Therefore, the suspension of the prescriptive period did not apply, and the right to assess for 1999 had prescribed.
2. On the finality of the FAN: The Court ruled that the FAN never attained finality because it was not validly served on respondent. Jurisprudence requires that assessment notices must be sent to the taxpayer’s correct address for the assessment to be valid. Petitioner sent the FAN to respondent’s old Las Piñas address despite being aware of the new Calamba address. This constitutes invalid service. Consequently, respondent did not receive the FAN, and the assessment did not become final, executory, and demandable. The subsequent notices sent to a director’s residence did not cure the defect in the service of the FAN.